Immigrants May Help Delay a Budget Reckoning

The logic behind the argument that immigrants are a drain on resources may seem sound—many are low-skilled and face a steep cultural learning curve—but a recent study suggests the exact opposite.

Between 2002 and 2009, immigrants—citizens or not—contributed $115 billion more to Medicare than they used, according to a new study in Health Affairs, the reputable health policy journal. The U.S.-born, on the other hand, generated a $28 billion deficit. Immigrants, it turns out, may be helping to delay a budget reckoning.

Soaring Medicare and health costs are expected to be a key contributor to the swelling debt. And that's the case even if a recent record slowdown in health cost growth is here to stay. Experts say lawmakers will have to make painful choices sooner or later, but that day may be further off, thanks to immigrants' contributions to the program. That finding, the authors argue, should cast doubt on arguments that immigrants are a drain on other programs, too:

Immigrants may withdraw more resources than they contribute to some government services. However, our finding that immigrants heavily subsidize [Medicare's Hospital Insurance] Trust Fund should raise skepticism about the widespread assumption that immigrants consistently drain public resources.

As with any study, there are limitations. The authors—educators from Harvard University and the City University of New York—relied on census data, which may undercount undocumented immigrants. But, they note, Social Security's top mathematician estimated that the undocumented actually contributed a net $12 billion to that program's trust fund in 2007. Because the two programs share a funding source—the payroll tax, with one-fifth going to Medicare and the rest to Social Security—it's likely that undocumented immigrants contributed about $2.5 billion to Medicare that year, the authors conclude.

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There are plenty of potential reasons for the outsized contributions to Medicare, the authors write. The ratio of working-age to retirement-age adults is much higher for immigrants—6.5 to 1—than the U.S.-born—4.7 to 1. Immigrants also have lower unemployment rates. And even undocumented immigrants may pay into the program through taxes tied to Social Security numbers with fake or borrowed names. All that means there are plenty of immigrant workers to pay into Medicare through payroll taxes.

There are also reasons that immigrants may use the program less. Some legal immigrants may not be eligible for Medicare because they don't meet minimum residency or work requirements. And studies show that immigrants use less health care in general than the U.S.-born.

The trend is good for Medicare, and it's one the authors suspect will last for some time. The general aging of the population and a recent drop in Mexican immigration may weaken the trend, but many of the existing Mexican immigrants won't retire for decades, the authors argue. And the number of working-age Asian immigrants will continue to grow, while the census predicts another 18 years of net-positive immigration, in absolute terms and as a share of the population.

Creating a path to citizenship for undocumented workers, as the Senate immigration bill would do, will certainly add to Medicare spending, but the authors argue that the age of the population matters much more. Ultimately, they conclude, policies that cut back on immigration would weaken Medicare.